After nearly doubling earlier this year, Green Thumb Industries (GTBIF +0.98%) gave up most of its tremendous gains. However, the U.S.-based marijuana stock is still up 20% and appears to be set to climb even higher.
Green Thumb Industries (GTI) announced its third-quarter results after the market closed on Wednesday. There are three things that investors will especially like about the company's Q3 update.
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1. Skyrocketing revenue
GTI reported revenue in the third quarter of $68 million. This reflected a 296% year-over-year jump and a 52% quarter-over-quarter increase.
The company's skyrocketing revenue was driven in part from a full quarter of sales contribution from Integral Associates, an acquisition that boosted GTI's presence in Nevada and California. GTI also delivered strong organic growth with its retail stores in nine other states. The cannabis operated noted especially strong traffic in its retail stores in Florida, Illinois, Nevada, and Pennsylvania.
GTI's comparable sales for stores that were open for at least 12 months (13 stores in total) were more than 50% higher than the prior-year period total. The company's sequential comparable sales growth from the second quarter of 2019 was 22% higher, with 17 stores included.
2. An improving bottom line
No, Green Thumb Industries didn't post a profit in the third quarter. However, the company did move in the right direction.
GTI reported Q3 adjusted operating earnings before interest, taxes, depreciation, and amortization (EBITDA) of $14.1 million, up from $5 million in the second quarter. The company's EBITDA totaled $1.6 million in the third quarter compared to an EBITDA loss of $9.4 million in the previous quarter. Its net loss came in at $17.1 million, an improvement from the loss of $22.2 million in Q2.
There were a couple of keys to GTI's improving bottom line. The company's gross profit was higher with its increased scale of operations. Also, GTI's total operating expenses as a percent of revenue dropped to 54% in Q3 from 72.6% in Q2.
3. A strong balance sheet
GTI founder and CEO Ben Kovler stated, "Critical to our ongoing success is a strong balance sheet that provides us with ample liquidity and financial flexibility to support our growth plans." An important component of that strong balance sheet that Kovler mentioned is the company's big cash stockpile.
The company ended the third quarter with cash and cash equivalents totaling $66.1 million. While that's down from nearly $146 million at the end of 2018, GTI still has plenty of cash remaining.
GTI reported a total debt of $96.9 million as of Sept. 30, 2019. This reflected a small increase from the company's $96.3 million of total debt announced in its second-quarter update.
Looking ahead
Kovler said that Green Thumb Industries is "well positioned to end 2019 on a strong note and expect to generate over $200 million in total revenue for the year as planned." The company also reaffirmed its guidance of having between 35 and 40 cannabis stores open by the end of 2019.
GTI should enjoy a nice boost when the adult-use recreational marijuana market opens in its home state of Illinois in January 2020. The company is remodeling its Illinois stores in anticipation of this significant new market.
Perhaps the most welcome news for GTI on Wednesday was the announcement that a bill to legalize marijuana in the U.S. passed a key committee in the U.S. House of Representatives. Should this legislation become law, it would open the floodgates for all U.S. marijuana stocks, including GTI. It's still early, though, and the bill faces a tougher challenge in the U.S. Senate.
